- Salesforce announced Microsoft Azure would be its public-cloud vendor for Salesforce’s cloud software for marketing professionals.
- It’s the latest in a long history of disputes and partnerships, and the first formal announcement between the two companies since their relationship soured after a contentious battle for LinkedIn in 2016.
- The two tech giants have had a rocky history, with their CEOs exchanging public barbs and suing each other, accusing one another of patent infringement.
- When Satya Nadella became Microsoft’s CEO, he introduced a friendlier Microsoft. Nadella “opened a door that was closed. And locked. And barricaded,” Salesforce CEO Marc Benioff said around that time. Salesforce and Microsoft announced their first partnership in 2014 and continued to work together.
- Then tensions rose again after Microsoft reportedly tried to buy Salesforce and came to a head after both companies bid on LinkedIn. Benioff even complained about the deal to regulators after Microsoft announced it would acquire LinkedIn. The companies partnered with each other’s rivals after that.
- The latest deal is indicative of Nadella’s strategy to do whatever it takes to make Microsoft the top cloud company as it tries to catch up to the market-leading Amazon, and it helps Salesforce stay relevant, analysts said.
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Salesforce’s surprise announcement that Microsoft Azure will be its public-cloud vendor for Salesforce’s cloud software for marketing professionals is the latest twist in a long history of partnerships and disputes.
The two tech giants have had a complicated relationship over the years, perhaps starting in the mid-2000s, when former Microsoft CEO Steve Ballmer and Salesforce CEO Marc Benioff traded public jabs. The animosity continued for nearly a decade, until Microsoft named a new CEO, Satya Nadella, who introduced a friendlier Microsoft.
Nadella “opened a door that was closed. And locked. And barricaded,” Benioff said at the time. The companies partnered for the first time, and Nadella even appeared at Salesforce’s big Dreamforce conference. But tensions started to rise once again as Microsoft tried to buy Salesforce, according to CNBC, and later beat Salesforce in a contentious bid to acquire LinkedIn.
Thursday’s announcement is the first formal partnership between Microsoft and Salesforce since that deal soured their relationship in 2016.
The latest back-and-forth is indicative of Nadella’s strategy to do whatever it takes to make Microsoft the top cloud company as it tries to catch up to the market-leading Amazon, Rob Oliver, a senior research analyst at Baird Equity Research, told Business Insider.
“If you look at the way that Satya Nadella has approached his job since he took the helm, he ran the Azure business,” Oliver said. “And he has approached this job as, ‘Microsoft is the No. 1 enterprise incumbent globally. What do we need to do to be the No. 1 cloud enterprise incumbent?”
The deal means Microsoft is putting aside competition in the customer-relationship-management space, where its Dynamics 365 competes with Salesforce, in order to grow its cloud business, Seth Lippincott, the director of research at Nucleus Research, said. That indicates the cloud is what Microsoft expects to drive the company’s growth, Lippincott said.
It also reveals that Microsoft’s strategy to catch up to the market-leading Amazon Web Services is to go after market share through big partnerships, the Gartner analyst Sid Nag said.
Microsoft has a big gap to close to catch up with AWS. Gartner in a report released over the summer pegged the 2018 market share for AWS at 47.8%, and that of Microsoft Azure at 15.5%. It seems clear that Microsoft has realized that it can’t close that distance without a little help from some frenemies.
“Organic growth is an extremely hard way to catch up with the market leader three times the size of the nearest competitor,” Nag said. “Their best bet to grow is through these partnerships and catch up with AWS.”
Meanwhile, the deal helps Salesforce stay relevant, Baird’s Oliver said. The company has been looking to move its data to public-cloud providers versus its own data centers, he said. As part of the deal, Salesforce will also build an integration across Sales Cloud, Service Cloud, and Microsoft Teams. Having these integrations with Microsoft’s suite of productivity tools as part of that, which many enterprise customers use.
The takeaway: The deal is mutually beneficial. “It’s pretty clear that there was a little something for everyone in this deal,” Oliver said.
Here’s a look back at the complicated history between Salesforce and Microsoft: